The Need of Shariah Governance for Small and Medium Enterprise (SME): A Literature Review

Abstract

Shariah Governance was introduced for islamic financial institutions on 2010 through Shariah Governance Framework 2010. Starting from that, other financial institutions including takaful, ar-Rahnu and cooperative started adapting the SGF 2010 to create shariah compliance economic system. Small and Medium Enterprises (SME) also contributing significant role in Malaysia economy which shows that these enterprises also need to adapt the SGF 2010. The objective of this paper is to review past literatures related to shariah governance and the need of shariah governance implementation in Malaysian SME thus observe the need of
shariah governance for SME. The methodology of this paper is qualitative by using contents analysis method and the data are analysed descriptively. The outcome of the literature review done shows that shariah governance complete the existing corporate governance which ensures all transactions and business operations are done in shariah compliance manner. It also increases an institution’s credibility and also public’s confidence on its shariah compliance status. This paper shows the importance of shariah governance implementation in SME enterprises. Therefore, further research needs to be conducted on what shariah governance model that are suitable with size, nature of business and the ability of SME enterprises to implement it.